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The Impact of CETA and Bill C-30 on Canada’s IP Landscape: Important Changes to Canadian Patent and Trademark Laws

The Comprehensive Economic and Trade Agreement (CETA)[1] was signed by Canada and the European Union (EU) on October 30, 2016. The next day, the Canadian government introduced Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures, aimed at implementing CETA.[2]

Part 2 of Bill C-30 includes a number of chapters amending Canadian laws, for the purpose of bringing them into conformity with CETA. Several chapters focus on intellectual property (IP), seeking to bring consistency between Canadian and EU IP rules, and setting out minimum standards of protection for trademarks, copyrights, and geographical indications of origin. Bill C‑30 also modifies the IP landscape for the pharmaceutical and biologics industries by modifying patent litigation under the Patented Medicines (Notice of Compliance) Regulations and by introducing a sui generis Supplementary Protection for Pharmaceutical Products.

This bulletin summarizes key changes to Canada's patent and trademark laws that will follow implementation of CETA.

Trademarks and CETA

As far as brand owners are concerned, there are three primary areas where CETA and Bill C-30 will take effect: Canada's accession to international treaties concerning trademarks, geographic indications, and customs enforcement measures.

International Agreements

Compliance with the Singapore Treaty on the Law of Trademarks and acceding to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks are basic requirements of CETA. Canada has already adopted legislation to meet these requirements and is waiting to bring the relevant Treaties into effect. Sometime during 2018, Canada is expected to adopt the Nice Classification system and Canadian trade-mark owners should be able to file trademark applications designating multiple countries under the Madrid Protocol.

Geographic Indicators

Canada's current trademark regime already prohibits use of geographic indicators (essentially, protected designations indicating that the goods in question originate from particular territories or regions) that would be misleading to the public, but that protection is limited to a specific list of wines and spirits. CETA and Bill C-30 will expand that protection dramatically to cover agricultural products and foodstuffs.

Once the new legislation comes into force, using any of the listed geographical indicators for goods that fall within the relevant product class will be prohibited, if those goods do not originate from the specified region or territory, or if they do originate from that region but were not produced in compliance with the laws and regulations that would apply if the product were to be consumed there. This means that the new laws cannot be circumvented simply by finding a way to manufacture products in the relevant geographic area and then shipping them to Canada - those products must also comply with local manufacturing and consumption requirements within the EU.

Absent a specific exception, the new prohibitions will apply even if the true origin of the product is indicated or where terms such as "style", "type" or "imitation" are included. Use of any designation that suggests a product originates from a geographical area other than the true place of origin, in a manner that misleads the public, will also be prohibited.

The scope of the prohibition is broad, in line with Canada's current regime for official marks and geographical indications, and will prevent use or adoption "in connection with a business, as a trademark or otherwise". The prohibition also extends to foodstuffs or products that belong to the same category.

Various exceptions to the new prohibitions will apply, some of which may be critical to Canadian brand owners and existing trade-mark users. These include:

marks which have been used or applied for before the publication of any intended geographic indicator;

certain cheeses and meats (such as Feta, Asiago and Jambon de Bayonne) if the names or marks were used for at least ten years prior to October 2013;

cheeses such as Feta, Asiago and Gorgonzola if a qualifying term such as "style" is used and the actual place of origin of the goods is clearly indicated;

common names in English and French for certain agricultural and food products such as Valencia Orange, Black Forest Ham and Parmesan;

terms customary in Canada as the common name for products that are identical to protected geographic indicators;

personal names;

comparative advertising (but not that appears on labels and packaging);

geographic indicators which have fallen into disuse or that have ceased to be protected by local law; and

where the consent of the relevant authority has been obtained.

Proposed new geographic indicators can be objected to on grounds that include the term is not a geographic indicator, is identical to a common name for the goods in question and that the proposed geographic indicator is confusing with a trademark that has been registered, used or applied for in Canada. Any interested person can also apply to the Federal Court to have a protected geographic indicator removed from the Minister's list based on grounds that are similar to those for objection, although certain well known EU and Korean indicators cannot be removed including Prosciutto di Parma, Roquefort, Aceto balsamico di Modena, Mortadella Bologna, Korean red Ginseng and Icheon Rice.

Customs Enforcement

In line with Canada's current regime for customs enforcement, Requests For Assistance can be filed for protected geographic indicators, meaning that shipments of products bearing those marks are liable to be seized on inspection if they fall foul of the new prohibitions - whether those goods are being imported or exported. Exceptions will be created for personal use and goods that are in transit through Canada only.

Impact

The greatest impact of Bill C-30 on Canadian brand owners is likely to be the prohibition against using or adopting protected geographic indicators on relevant goods (or goods in the same class). For food manufacturers, the implications could be significant and the scope of the prohibitions is not limited to use and registration of trademarks - any use or adoption of the relevant terms in the course of business is prohibited.

Some relief is granted through the exceptions that have been created, in particular for brand owners who can show prior use or registration of their marks and for those terms that are listed as being common or which fall under the customary names exception. Comparative advertising that does not appear on labels and packaging is also exempted, giving brand owners a platform to market their products and compete directly with goods protected by geographic indicators without falling foul of the new legislation.

The expansion of the customs recordal procedures to cover the import and export of food and agricultural products could also become significant, although the existing process for registered trademarks remains in its infancy and has yet to be rolled out effectively on a significant scale.

Patents and CETA

CETA makes a number of changes to Canada's patent laws, most of which concern patents in the pharmaceutical industry.

Modification to the Patented Medicines (Notice of Compliance) Regulations

For a pharmaceutical composition to be sold in Canada, it must first receive regulatory approval from Health Canada. Such regulatory approval is sometimes referred to as market approval, market authorization or Notice of Compliance. A generic company wishing to obtain a subsequent regulatory approval for its generic version of a drug can compare its product to the approved innovator product, but cannot receive regulatory approval unless it can overcome the patents that are associated with the innovator's product and listed on the Patent Register.[3] This Patent Register is created under the Patented Medicines (Notice of Compliance) Regulations (the PM(NOC) Regulations). The PM(NOC) Regulations thus create a bridge between the regulatory approval of drugs and the Patent legislation and are often referred to as a "patent linkage mechanism".

The PM(NOC) Regulations also provide for a summary proceeding by which generic companies address patents listed on the Patent Register. Currently, both innovators and generics can apply for remedy under the PM(NOC) Regulations, but for different reasons. While brand-name manufacturers apply to have generic drugs barred from entering the market, generic companies apply to be entitled to market their drugs before the patent listed on the register have expired. These patents can be addressed by the generic companies by challenging their validity, by alleging non-infringement, or both. If the generic company is successful, it receives a "Notice of Compliance" for its drug. If they are unsuccessful, generic manufacturers have a right of appeal under the PM(NOC) Regulations.

Unlike generic manufacturers, brand-name manufacturers do not currently have a right to appeal under the PM(NOC) Regulations. The only recourse left open to innovators is to initiate a "conventional" patent infringement action before the Federal Court of Canada. This situation creates a scenario of "dual litigation" in which a same patent is litigated under the PM(NOC) Regulations and then under the Patent Act. This situation can lead to substantially different results, as findings under the PM(NOC) proceedings regarding patent infringement or validity are not binding upon the Court in a later "conventional" patent infringement action.

CETA aimed at resolving this situation by providing all litigants equivalent and effective rights of appeal when a Party relies on patent linkage mechanisms (as Canada does):

If a Party relies on "patent linkage" mechanisms whereby the granting of marketing authorisations (or notices of compliance or similar concepts) for generic pharmaceutical products is linked to the existence of patent protection, it shall ensure that all litigants are afforded equivalent and effective rights of appeal.

In order to implement Canada's obligations under CETA article 20.28, Bill C-30 provides further regulation-making authority to permit the replacement of the current summary proceedings under the PM(NOC) Regulations with full actions that will result in final determinations of patent infringement and validity. More specifically, Section 39 of Bill C-30 will amend section 55.2 of the Patent Act as follow:

55.2 (4) The Governor in Council may make regulations respecting the infringement of any patent that, directly or indirectly, could result or results from the making, construction, use or sale of a patented invention in accordance with subsection (1), including regulations

(j) respecting such proceedings, including the procedure of the court in the matter, the defences that may be pleaded, the remedies that may be sought, the joinder of parties and of rights of action and the consolidation of other proceedings, the decisions and orders the court may make and any appeals from those decisions and orders; and […]

It is not clear at this date how the PM(NOC) Regulations will be amended to implement this right of appeal of the brand-name manufacturers. It is likely that the current 24-month automatic stay[4] will need to be extended or that the Canadian courts will have to adjust their scheduling practices in order to allow the effective right of appeal from innovators.

Because most of the changes to the PM(NOC) regime will occur by regulation, it is not yet known how extensive the reforms will be. For example, is the reference to "joinder of parties and […] consolidation of proceedings" a signal that Parliament intends to move towards a US-style consolidated proceeding, in which all generics make their case in the context of a single litigation? At the time of writing, that simply isn't known.

Supplementary Protection for Pharmaceutical Products

Drugs are authorized for sale in Canada once they have successfully gone through the drug review process by which the safety, efficacy and quality of drugs are assessed. Due to the nature of the scientific evidence to be provided, regulatory approval of drugs can be extremely long. Incidentally, brand-name pharmaceutical companies feel the need to file patent applications covering their drugs early in the process, because delayed filing may result in the disclosure of information (e.g. in the context of clinical trials), because they want to avoid being confronted with new prior art in a rapidly evolving field, or because they want to prevent another company from obtaining a patent for the same drug under the "first to file" priority rule. Since patents have a defined term of 20 years from the filing date of the application, the combination of early filing for pharmaceutical patents and the delays associated with drug regulatory approval often result in a pharmaceutical patent expiring shortly after commercialization of the drug becomes possible.

The fact that the term of patent protection is inadequate for some pharmaceutical products has been recognized in Europe but had yet to be acknowledged in Canada. Article 20.27 of CETA corrects this situation by providing for a sui generis protection for pharmaceuticals and Bill C-30 seeks to amend the Canadian legislation to mirror the European legislation, by implementing a patent restoration term through the issuance of a Certificate of Supplementary Protection (CSP).

A CSP will take effect on the expiry of the patent set out in the certificate (i.e. after 20 years from the filing date of the patent application in Canada), provided that the patent remains valid until, and not void before, the expiry of that term.[5] After the certificate is issued, it is presumed valid[6] and provides the certificate's holder with essentially the same rights, privileges and liberties that are granted by the patent set out in the certificate.[7]

The term of a CSP will be calculated based on the difference in time between the filing date of the patent application and the grant of the regulatory approval, but cannot exceed two years in total.[8] The Minister of Health will be entitled to reduce the term of the CSP if he finds that the patentee's failure to act resulted in a period of unjustified delay in the process of obtaining the regulatory approval.

Each application for a CSP can identify only one patent.[9] To obtain a CSP for a patented invention, all of the following conditions must be met:

an application must be filed with the Minister of Health;

a fee must be paid (the exact amount to be determined by future regulations);

the patent is not void and it meets the requirements that will be determined by future regulations;

the filing date for the application for the patent is on or after October 1, 1989;

the patent pertains to a medicinal ingredient (or combination of medicinal ingredients), contained in a drug for which an authorization for sale of the prescribed kind was issued on or after a date to be determined by regulations;

the authorization for sale is the first authorization for sale that has been issued with respect to the medicinal ingredient (or the combination of medicinal ingredients);

no other certificate of supplementary protection has been issued with respect to the medicinal ingredient (or the combination of medicinal ingredients);

if an application for a marketing approval was submitted in a designated country with respect to the medicinal ingredient (or combination of medicinal ingredients) before the application for the authorization for sale was filed in Canada, the application for the authorization for sale in Canada must be filed before the end of a period that begins on the day on which the first such application for a marketing approval was submitted in the designated country and that ends at a date to be determined by regulations.[10]

The application for a CSP must be filed before the end of the prescribed period that begins either on the day on which the authorization for sale is issued (if the patent is granted on or before that day) or the day on which the patent is granted (if the patent is granted after the day on which the authorization for sale is issued).[11] The date at which the prescribed period ends has yet to be defined through regulations. These regulations will also provide for a prescribed period preceding the expiry of the term of the patent after which it will no longer be possible to file an application.[12]

The prescribed contents of all CSP and applications for a certificate will be made available for public inspection under the conditions that will be prescribed[13], but only if a CSP is granted. The contents of applications for a certificate that are refused, declared invalid or void, expired or withdrawn will not be made available to the public.[14]

A CSP, or any claim in the patent set out in such a CSP, may be declared invalid or void by the Federal Court, at the instance of the Attorney General of Canada or any interested person. Grounds from challenging a CSP will include non-compliance with any of the requirements for the issuance of the CSP as they existed at the time that the CSP was issued, and the fact that the patent set out in the CSP no longer complies with the requirements as they existed at that time.[15] Every judgment voiding a certificate of supplementary protection or any claim in the patent set out in such a certificate, and every judgment refusing to do so, is subject to appeal to any court having appellate jurisdiction in other cases decided by the court by which the judgment was rendered.[16]

Bill C-30 also seeks to amend the provisions of the Patent Act pertaining to the Patented Medicine Prices Review Board (PMPRB) to extend its jurisdiction to drugs under a CSP. Consequently, people entitled to the benefit of a CSP for an invention pertaining to a medicine will need to provide the PMPRB with the same pricing information that is required from patentees and former patentees.

Impact

CETA's patent impact will be felt most strongly by the pharmaceutical industry. The creation of CSP brings Canada's patent term length into line with our major trading partners. Both generics and innovators will need to adjust their patenting and litigation strategies to take account of CSP and future amendments to the PM(NOC) regime. Innovators will want to prepare themselves to systematically seek CSP certificates for their patented medicines in order to maximize the term of patent protection in Canada. Generics will need to take account of the potentially longer period of protection in formulating their own marketing and litigation strategies. With respect to PM(NOC), it is not yet known how radical the upcoming reforms will be – will they be limited to a right of appeal and related changes, or will the reforms be more fundamental in scope? We will continue to monitor the situation and provide regulatory updates as information becomes available.

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